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3: Analyze Your Habits

Determine Your Benefits Requirement

Understand Employer Benefits

To get a full understanding of employer benefits, employer-sponsored retirement plans and how benefits can affect your tax liability, use SAM’s Money Basics: Employment course.

Get a Fix on Retirement

Need help planning for retirement? Check out SAM’s Money Basics: Investing and My Retirement Plan courses to anticipate and plan your retirement.

The benefits you receive from your employer may matter more or less depending on your circumstances at any given point. For example, having flexible work hours may be important if you have to care for an elderly family member or young child. Dental insurance may not be the top of your list if your spouse’s employer offers a better plan. Knowing your benefits needs can help you look at the total compensation package more critically.

Common Employer Benefits

Employee benefits can increase the value of your salary by 20 percent or more. Some benefits are fully paid by the employer, while others require you to pay all or part of the cost. When you choose a career or make a change, it pays to compare carefully how your benefits help achieve your financial goals.

Common types of benefits include:

  • Each type of time off has its advantages and disadvantages. Being able to take off for appointments, to take care of family, or simply to rest can help you return to work more energized and focused.
  • Understand the types of time off you are allowed so you don’t negatively affect your finances. When you change jobs, will you be paid out for unused vacation and personal days? Do unused vacation days roll into the next year? If not, then it is in your best interest to take your vacation days before you lose them.
  • Employer-subsidized plans, where your employer pays at least some of your premium every month, are ideal. You still have to pay part of the premium along with copays and deductibles, but your portion of the burden will be lightened by your employer’s contribution. Know how much your employer contributes and how much you will end up paying in premiums, deductibles and other out-of-pocket costs.
  • Dental insurance often works in the same way as health insurance, with your employer picking up part of your premiums. You will be responsible for copays and deductibles, especially if you go to a dentist outside the lower-cost network.
  • Pensions are a retirement plan option where you contribute a certain amount of your income from every paycheck. After you have contributed long enough to be vested (meaning that you’ve worked at your employer long enough to earn the right to employer-provided contributions), and depending on your salary and years of service, you will be paid a certain amount each month in retirement.

401(k) and 403(b) Retirement Plans

  • These retirement plans are tax-deferred plans generally offered through an employer. They allow you to invest with pretax dollars. This leaves you with more take-home pay than if you invested in a Roth Individual Retirement Account (IRA), where all contributions are made after taxes. When you start withdrawing money, typically after age 59 ½, you will pay taxes on those withdrawals. Many employers will match your contributions up to a certain amount, giving you free money toward retirement. Some employers match a portion of your contributions to your 401(k) or 403(b) up to a certain level. Try to contribute up to the maximum that the employer will match because this essentially is free money.

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